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Taste-based Investing, Government Policies and Competition in Financial Intermediation

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  • Mr. Damien Capelle

Abstract

This paper develops a theory of how investors’ tastes are transmitted to aggregate investment through the market structure of financial intermediation. Whether tastes affect equilibrium capital allocation depends on where they originate—from households or from intermediaries—and on the degree of competition and segmentation in funding markets. Strong competition amplifies the pass-through of households’ tastes for amenity assets, but arbitrages away intermediaries’ own tastes. The same forces shape the effectiveness of financial-sector policies targeting households or intermediaries. I apply and quantify the framework in the context of green finance.

Suggested Citation

  • Mr. Damien Capelle, 2026. "Taste-based Investing, Government Policies and Competition in Financial Intermediation," IMF Working Papers 2026/019, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2026/019
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